Rio Tinto Plc · LSE:RIO

Rio Tinto — Investor Day (December 2017)

71 slides from Rio Tinto's investor day presentation, Dec 4, 2017

  1. Slide 1: Notice to ASX: Rio Tinto Investor Seminar 2017

    Notice to ASX For personal use only Rio Tinto Investor Seminar 2017 4 December 2017 Rio Tinto is hosting a seminar in Sydney at 10:00am (AEDT) today. The seminar will be hosted by chief executive J-S Jacques, with presentations by:  Chris Lynch, chief financial officer  Alf Barrios, chief executiv

  2. Slide 2: Contacts

    For personal use only Contacts media.enquiries@riotinto.com riotinto.com Follow @RioTinto on Twitter Media Relations, United Kingdom Media Relations, Australia Illtud Harri Jonathan Rose T +44 20 7781 1152 T +61 3 9283 3088 M +44 7920 503 600 M +61 447 028 913 David Outhwaite T +44 20 7781 1623 M +4

  3. Slide 3: Investor Seminar, Sydney, 4 December 2017

    For personal use only Investor Seminar Sydney, 4 December 2017 J-S Jacques | chief executive

  4. Slide 4: Cautionary statements

    2 Cautionary statements For personal use only This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (“Rio Tinto”). By accessing/attending this presentation you acknowledge that you have read and understood the following statement. Forward-looking statements This document, includ

  5. Slide 5: Supporting statements

    3 Supporting statements For personal use only Ore Reserves (slide 10) Reserve grade for Oyu Tolgoi Underground – Hugo Dummett North and Hugo Dummett North Extension. Probable Ore Reserves for Hugo Dummett North and Hugo Dummett North Extension (499 Mt at 1.66% Cu, 0.35g/t Au) were released to the ma

  6. Slide 6: Safety and health come first

    4 Safety and health come first For personal use only Continuing history of improvement Balanced safety strategy Focusing on fatality elimination – 1.2 million CRM verifications Rio Tinto ICMM (23 companies) 2.78 Reducing injuries – Targeted hazard elimination campaigns All injury frequency rate per

  7. Slide 7: Cash focus with capital discipline delivers strong shareholder returns

    Cash focus with capital discipline delivers strong 5 For personal use only shareholder returns Capital discipline and Team and performance Long-term strategy Cash focus shareholder returns culture World-class assets Value over volume Strong balance sheet Safety first $5 billion free cash flow from m

  8. Slide 8: Global macro indicators remain supportive

    6 Global macro indicators remain supportive For personal use only PMIs remain elevated Global growth momentum remains healthy 65 US growth supported by record high consumer confidence and healthy manufacturing and investment 60 EU performing better than expectations on stronger manufacturing and 55

  9. Slide 9: Our product quality delivers strategic competitive advantage in significant markets

    Our product quality delivers strategic competitive 7 For personal use only advantage in significant markets Our premium products …have a strategic Our 62% iron ore benefits High-quality, expandable Strong global aluminium Our copper growth from structural change bauxite assets in low demand: Chinese

  10. Slide 10: World-class high-margin assets with attractive growth options

    World-class high-margin assets with attractive 8 For personal use only growth options Iron Ore Bauxite Aluminium Copper Specialty products Main Oyu Tolgoi, TiO2 Pilbara Weipa, Gove, CBG Canadian smelters businesses Escondida Borates Low-cost assets, Large, low-cost, significant resources Expandable

  11. Slide 11: We returned 40% of cash generated to shareholders

    9 We returned 40% of cash generated to shareholders 1 For personal use only Most disciplined and balanced allocation of capital in H1 2017 40% 26% 21% 10% 0% Sustaining capex Growth capex M&A Balance sheet Shareholder returns Rio Tinto Peer 1 Peer 2 Peer 3 Peer 4 1 Cash generated = net cash generate

  12. Slide 12: High-return growth

    10 High-return growth For personal use only Significant brownfield Longer-term Amrun Oyu Tolgoi opportunities growth opportunities Creating seaborne bauxite Largest and highest quality Pilbara iron ore, Queensland Jadar (lithium/borates), market, high-grade, expandable copper development in the worl

  13. Slide 13: Productivity will further enhance our ROCE and TSR

    11 Productivity will further enhance our ROCE and TSR For personal use only Rio Tinto has achieved the …providing superior Additional $1.5 billion free cash flow in highest ROCE every shareholder returns 2021 from productivity will drive the year since 2013… next phase of outperformance Average ROCE

  14. Slide 14: Delivering $5 billion of additional free cash flow from productivity

    Delivering $5 billion of additional free cash flow from 12 For personal use only productivity Mine to market …with a focus on …delivering $5 billion of additional free productivity… Marketing four levers… cash flow Best practice Mining Infrastructure Asset Productivity Partnering with management Pro

  15. Slide 15: Investor Seminar: Chris Lynch, chief financial officer

    For personal use only Investor Seminar Sydney, 4 December 2017 Chris Lynch | chief financial officer

  16. Slide 16: Disciplined capital allocation

    14 Disciplined capital allocation For personal use only Essential 1 sustaining capex Further cash Compelling Ordinary returns to 2 dividends shareholders growth Iterative 3 cycle of Debt management ©2017, Rio Tinto, All Rights Reserved

  17. Slide 17: Strong balance sheet enables high cash returns to shareholders

    Strong balance sheet enables high cash returns 15 For personal use only to shareholders Strongest balance sheet in the sector $6.3 billion of cash returns in 2017 $ billion $7.6bn 0.6 Net debt at 30 June 2017 2.2 2016 final dividend 1.5 2017 interim dividend 2017 plc on-market buy-back 0.4x 2017 Ltd

  18. Slide 18: Sustaining capital and compelling growth

    16 Sustaining capital and compelling growth For personal use only Capital expenditure profile Maintained sustaining capital guidance of $2.0 to $2.5 $ billion billion per year, including ~6.0 ~6.0 – Iron Ore sustaining capex of ~$1 billion per year ~5.5 Pilbara replacement capital includes Koodaider

  19. Slide 19: On track to deliver additional cash in 2017 and 2018

    17 On track to deliver additional cash in 2017 and 2018 For personal use only $320m of headwinds from $0.3bn $0.9bn raw material inputs 0.6 0.3 0.9 0.6 $0.3bn Volume Cost headwinds Cost 2017 & 2018 cumulative total* Approximately equal contribution across product groups $0.3bn No volume productivity

  20. Slide 20: Rigorous measurement of productivity gains

    18 Rigorous measurement of productivity gains For personal use only Accounting basis – Free cash flow basis, Rio Tinto share, post-tax Price – Actual price achieved each year – not a constant or rebased price Commercial excellence – Variation of product mix included Volumes – Tonnes from growth cape

  21. Slide 21: Delivering $1.5bn additional free cash flow each year from 2021

    Delivering $1.5bn additional free cash flow each year 19 For personal use only from 2021 $1.5bn productivity opportunity in 2021 Productivity levers ($5bn cumulative, 2017-2021) Our focus across the value chain Commercial excellence and customer focus Best practice Partnering with our suppliers Opti

  22. Slide 22: Growth & Innovation

    For personal use only Growth & Innovation Sydney, 4 December 2017 Stephen McIntosh | Group Executive, Growth & Innovation Rob Atkinson | Head of Productivity & Technical Support

  23. Slide 23: Growth & Innovation enabling value generation across asset lifecycle

    Growth & Innovation enabling value generation across 21 For personal use only asset lifecycle Find Study Develop Optimise Close Technical Excellence geosciences, mining, processing, infrastructure, asset management, integrated operations Information Systems & Technology enterprise services, platform

  24. Slide 24: Our focus builds on leadership in data, technology & automation

    Our focus builds on leadership in data, technology 22 For personal use only & automation MAS* / RTVisTM First Autonomous Perth Operating Data Science Fusion Modelling Predictive Insights Haul Truck Loaded Centre Opens Unit Established and Deployment * Mine Automation System 2008 2009 2010 2014 2015

  25. Slide 25: Driving Rio Tinto mine to market productivity

    23 Driving Rio Tinto mine to market productivity For personal use only Partnering Refocus on Best Additional $5bn with our the basics practice suppliers mine to market in 5 years Operating assets & Deliver Redesign Data & projects Automation technology operations our future of the future Performance

  26. Slide 26: Delivering $1.5bn additional free cash flow each year from 2021

    Delivering $1.5bn additional free cash flow each year 24 For personal use only from 2021 $1.5bn productivity opportunity in 2021 Productivity levers ($5bn cumulative, 2017-2021) Our focus across the value chain Commercial excellence and customer focus Best practice Partnering with our suppliers Opti

  27. Slide 27: Truck and dig unit payload increases: moving more with the same

    Truck and dig unit payload increases: 25 For personal use only moving more with the same Assets Scope Results 686 trucks 118 dig units 5 suppliers +6% payload 1 (2017 improvement over 2016) Payload of trucks increased by 15-20t Collaborated with truck, loading equipment and tyre suppliers across 18

  28. Slide 28: Truck change over to increase operating hours

    Truck change over to increase operating hours: 26 For personal use only using our trucks more efficiently Assets Scope Results 686 trucks Operating time +7% EU 1 (2017 improvement over 2016) Targeting trucks to work over 75% of calendar hours Targeting improvement across whole of mining cycle Truck

  29. Slide 29: Processing plant throughput: increasing rates

    Processing plant throughput: 27 For personal use only increasing rates Assets Scope Results +7% tonnes per hour 46 plants Feed rate Weipa, Oyu Tolgoi (2017 improvement over 2016) Andoom producing at 2x nameplate with practices being replicated at East Weipa Gove – conveying system reliability improv

  30. Slide 30: Video – MAS

    28 Video – MAS For personal use only ©2017, Rio Tinto, All Rights Reserved

  31. Slide 31: Innovating for productive growth options

    29 Innovating for productive growth options For personal use only Innovation in ore body knowledge Designing for the future Lean in construction 3D orebody shells - Resolution Oyu Tolgoi Isometric Looking North: Feasibility Study Footprint Jadar – Illustration of proposed processing plant Amrun – Ch

  32. Slide 32: Video – Amrun development

    30 Video – Amrun development For personal use only ©2017, Rio Tinto, All Rights Reserved

  33. Slide 33: Leading data platform to enable productivity journey

    31 Leading data platform to enable productivity journey For personal use only 3rd party 21st century platform digital Bots & Rio Tinto Fusion machine data platform database learning Visualisation & Optimisation user interfaces ©2017, Rio Tinto, All Rights Reserved

  34. Slide 34: Leveraging technical excellence to drive value

    32 Leveraging technical excellence to drive value For personal use only Technical Excellence geosciences, mining, processing, infrastructure, asset management, integrated operations Centres of excellence & connected Critical roles & career paths Talent development & mentoring working groups ©2017, R

  35. Slide 35: Driving Rio Tinto mine to market productivity

    33 Driving Rio Tinto mine to market productivity For personal use only Partnering Refocus on Best Additional $5bn with our the basics practice suppliers mine to market in 5 years Operating assets & Deliver Redesign Data & projects Automation technology operations our future of the future Performance

  36. Slide 36: Iron Ore: Chris Salisbury

    For personal use only Iron Ore Sydney, 4 December 2017 Chris Salisbury | chief executive, Iron Ore

  37. Slide 37: Strong business foundations and clear strategy

    35 Strong business foundations and clear strategy For personal use only Foundations Value over Volume Strategy Revenue Exclusive fully Price impact of integrated system incremental tonnes Protecting quality Delivering right tonnes to customers who value them Highly valued product suite and significa

  38. Slide 38: Attractive margins and pollution controls supporting a sustained focus on productivity

    Attractive margins and pollution controls supporting 36 For personal use only a sustained focus on productivity China mill cash margins Steel demand and prices in China supported by growth $ per tonne 130 Private Billet Private Rebar SOE HRC across key end-use sectors 100 70 40 10 Low steel stocks,

  39. Slide 39: Demand for quality iron ore remains strong, with the high / low spread continuing

    Demand for quality iron ore remains strong, with the 37 For personal use only high / low spread continuing Iron ore prices Iron ore futures market no longer characterised by the $ per tonne 100 structural backwardation of recent years 90 80 70 60 The wide spread between high and low quality ores 50

  40. Slide 40: Our Pilbara Blend remains the product of choice

    38 Our Pilbara Blend remains the product of choice For personal use only Blending reduces product variability Consistency of our Pilbara Blend (PB) products gives our Product quality variance from mean customers predictability in managing their blast furnace Fe Alumina Silica Phosphorus burden PB lu

  41. Slide 41: Capital for high-quality asset options to maintain Pilbara Blend

    Capital for high-quality asset options to maintain 39 For personal use only Pilbara Blend and the broader portfolio Pilbara development options Multiple low-cost, value-accretive options leveraging $ per tonne installed capital intensity existing infrastructure 120 Bubble size indicates capacity Koo

  42. Slide 42: Focused on sustaining our competitive advantage

    40 Focused on sustaining our competitive advantage For personal use only Rio Tinto Iron Ore EBITDA performance Cost driver trend 80% Cost driver 2017 2018 70% Strip ratio 60% Haul distance 50% Bulk materials 40% Labour costs Cyclic maintenance costs 30% 20% H113 H213 H114 H214 H115 H215 H116 H216 H1

  43. Slide 43: Productivity options to continue to deliver cash benefits

    41 Productivity options to continue to deliver cash benefits For personal use only Partnering Best Practice Data & Technology Automation with Suppliers Effective equipment utilisation Payload optimisation and maintenance optimisation Mine planning optimisation Autonomous trucks (including retro-fit)

  44. Slide 44: Priority is to optimise infrastructure capacity and flexibility

    Priority is to optimise infrastructure capacity 42 For personal use only and flexibility Current system capacity Future system capacity ~360* ~360 ~330 Mt/a Mt/a Mt/a Mine capacity of ~360Mt/a, Building excess rail capacity Optimise and 2018 guidance with full Silvergrass ramp- to provide for flexib

  45. Slide 45: Significant improvements achieved across our mines

    43 Significant improvements achieved across our mines…. For personal use only Truck effective utilisation and payload improvements Haul Truck Effective Utilisation Truck Payload Time %, indexed, Sep YTD Time %, indexed, Sep YTD have delivered cost savings and capital deferrals 7% 8% 20 extra tonnes

  46. Slide 46: Other productivity improvements continuing to deliver results

    …with other productivity improvements continuing to 44 For personal use only deliver results Drill Effective Utilisation Balancing quality and value from our mines Time %, Oct YTD, site comparison 30% Run the production 1.3 drills for more 1.0 hours… IO Manned Ave. IO ADS Ave. Drill Penetration Rate

  47. Slide 47: Levers to optimise rail circuit capacity and improve flexibility

    Along with AutoHaulTM, there are many levers 45 For personal use only to optimise rail circuit capacity and improve flexibility AutoHaulTM Closer Rail track Yard scheduling Eliminating • Current project train spacing maintenance and productivity brake cars • Future opportunities Mine Yard Dumper Mai

  48. Slide 48: AutoHaul making strong progress

    46 AutoHaulTM making strong progress… For personal use only World’s first fully autonomous heavy haul mainline run completed in Sept 2017 ~60% >1million ~6% production kilometres kilometres Speed improvement currently completed in completed in autonomous in autonomous autonomous mode1 mode1 this yea

  49. Slide 49: Rail productivity and improved track condition the keys to unlocking value

    …with rail productivity and improved track condition the 47 For personal use only keys to unlocking value Yard improvement (minutes) Dumping - placing train improvement (minutes) Yard scheduling automation and 15% Continued improvements in cycle time 25% optimisation 202 20.5 Brake cars to be elimin

  50. Slide 50: Improving the capability of our port assets

    Improving the capability of our 48 For personal use only port assets Leveraging technology to gain capacity Dumper Cycle Time Cape Lambert, CD1C Real-time asset health monitoring supporting 1.00 14% condition-based maintenance 0.94 0.86 Proactive dumper system adjustments optimising throughputs of d

  51. Slide 51: Technology, innovation and people enabling an agile, market-driven organisation

    Technology, innovation and people enabling an agile, 49 For personal use only market-driven organisation Step-change technology Innovation projects Skills and development Operations Centre optimisation Drone monitoring Recognising employee innovation AutoHaulTM Remote isolation Data analytics Retrof

  52. Slide 52: Strong foundations, clear strategy and key initiatives

    Strong foundations, clear strategy and key 50 For personal use only initiatives will continue to realise optimal value Iron Ore High-value product suite ~$0.5 billion additional free cash flow Strong customer relationships per year from 2021 Fully integrated and flexible system Rail system optimisat

  53. Slide 53: Aluminium: Alf Barrios

    For personal use only Aluminium Sydney, 4 December 2017 Alf Barrios | chief executive, Aluminium

  54. Slide 54: Strong global aluminium demand with Chinese production at a turning point

    Strong global aluminium demand with Chinese 52 For personal use only production at a turning point Primary aluminium production and stocks Weeks of Aluminium demand growth ~4% p.a. next 5 years Million tonnes consumption 80 18 Strict enforcement of Chinese capacity control and winter cut regulations

  55. Slide 55: We will maintain our low-cost position

    53 We will maintain our low-cost position For personal use only Commodity Index (base 2016) 250 Aluminium LME +22% Caustic +44% 200 Coke +73% Pitch +98% Raw materials & energy lifting cost curve by 10% vs 2016 150 Costs are expected to stay elevated in 2018 50 2016 2017 Rio Tinto well placed Alumini

  56. Slide 56: We continue to widen the gap over our competitors

    54 We continue to widen the gap over our competitors For personal use only Upstream EBITDA margins (per cent) Margin gap: portfolio quality and performance delivery 45 Rio Tinto EBITDA margin increase to 35% 40 35 Cash cost improvements $1.7bn since 2012 30 +16 25 20 15 10 5 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

  57. Slide 57: Productivity options to continue to deliver cash benefits

    55 Productivity options to continue to deliver cash benefits For personal use only Partnering Best Practice Data & Technology Automation with Suppliers Creep Rail debottlenecking & payload optimisation Mine planning optimisation Shipping optimisation Equipment utilisation Predictive analytics & opti

  58. Slide 58: Increasing returns on bauxite and alumina

    56 Increasing returns on bauxite and alumina For personal use only Managed bauxite production Million tonnes Maximising value from our existing bauxite operations 45 43 ‒ Production track record: Weipa 6% p.a. / Gove 8% p.a. +7% ‒ Maximising value-in-use by customer 40 39 35 ‒ Value over volume, opt

  59. Slide 59: Asset performance drives next phase of productivity

    57 Asset performance drives next phase of productivity For personal use only Leveraging Rio Tinto Weipa performance ‒ Weipa: rail expertise to unlock system capacity (higher speeds and wagon loads) +13% +2% 2016 ‒ Gove: asset management expertise to unlock throughput 1.13 (plant reliability) 2017 YT

  60. Slide 60: Smelters creeping at 1% per annum, double industry average

    Smelters creeping at 1% per annum, double industry 58 For personal use only average Amperage creeping history Long history of cutting-edge smelter productivity ‒ Industry-leading technology, expertise and innovation +14% +10% +7% ‒ Creep innovation the engine of technology productivity Low capital i

  61. Slide 61: Technology, process intelligence and expertise underpin our competitive advantage

    Technology, process intelligence and expertise 59 For personal use only underpin our competitive advantage Industry-leading technology Process intelligence Skills & expertise AP Technology Advanced control systems Technology and product development APxe low energy consumption Anode resistivity measu

  62. Slide 62: Analytics and integrated operations drive the next wave of productivity

    Analytics and integrated operations drive the next wave 60 For personal use only of productivity Data analytics Automation Integrated Operations Anode traceability Anode change Real-time process optimisation & integration Anode spike predictive detection Automated Guided Vehicle logistics Hydropower

  63. Slide 63: Enhancing margins through VAP

    61 Enhancing margins through VAP For personal use only Rio Tinto VAP product premiums1 Value added product (VAP) enhances margins $ per tonne ‒ VAP 57% of portfolio, targeting >70% 341 ‒ Additional revenue $217 per tonne1 250 199 180 159 ‒ Cumulative free cash flow improvement of $0.3bn by 2021 Slab

  64. Slide 64: Strong outlook, value delivery through productivity and growth options

    Strong outlook, value delivery through productivity and 62 For personal use only growth options Strong demand outlook Aluminium China supply-side turning point ~$0.5 billion additional free cash flow per year from 2021 … World-class first quartile assets ‒ Hot metal and bauxite creep ‒ VAP volume &

  65. Slide 65: Investor Seminar: J-S Jacques

    For personal use only Investor Seminar Sydney, 4 December 2017 J-S Jacques | chief executive

  66. Slide 66: Achieving $1.5bn of productivity improvements a year from 2021

    Achieving $1.5bn of productivity improvements a year 64 For personal use only from 2021 ($5bn cumulative) Iron Ore Aluminium Copper & Diamonds Energy & Minerals Indicative exit rate $0.5 billion $0.5 billion $0.15 billion $0.35 billion Rail system optimisation - Hot metal and bauxite creep Mining Co

  67. Slide 67: A track record of sector-leading delivery

    65 A track record of sector-leading delivery For personal use only Reduced Reduced by costs $8.2bn Operating, exploration and evaluation cost net debt Since net debt peaked $14.5bn reductions achieved by at 30 June 2013 30 June 2017 vs 2012 Recycling Materially capital via increased by divestments c

  68. Slide 68: Maintaining a disciplined and consistent strategy

    66 Maintaining a disciplined and consistent strategy For personal use only Superior cash generation World-class assets Operating excellence Capabilities Portfolio Performance People & Partners Disciplined capital allocation Balance sheet strength Superior shareholder returns Compelling growth ©2017,

  69. Slide 69: Appendix

    For personal use only Appendix

  70. Slide 70: 2018 guidance

    68 2018 guidance For personal use only Iron Ore: Pilbara shipments 330-340 Mt (100% basis) Aluminium: 49-51 Mt bauxite, 8.0-8.2 Mt alumina, 3.5-3.7 Mt aluminium Copper & Diamonds: 510-610 kt mined copper, 225-265 kt refined copper, 17-20 Mcts diamonds Coal: 7.5-8.5 Mt hard coking, 3.8-4.5 Mt thermal

  71. Slide 71: Volumes relevant for productivity

    69 Volumes relevant for productivity For personal use only Project Capex type In Out OT underground Growth OT open pit N/A Amrun - Weipa replacement Replacement - Incremental up to design capacity Growth - Incremental in excess of design capacity Pilbara - Growth pre-AutoHaulTM completion Growth - I

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